I've had several things cause the symptoms you're fighting with. I'll just list them here (some of it was also in my book) and maybe you'll see something that might fit your situation?
1. Slightly corroded, poorly-recovering (after application) plunger valve in the master cylinder. It made every kind of pad squeal after a couple of miles, putting glazes on them with a slight drag after the first 2 or 3 stops. This usually showed up after the bikes were parked a long time.
2. Beveled the outer circumference of the new pad (yours looks like it already is: some are not), then cut an "X" across the face of the pads (both sides) with a hacksaw blade to prevent chatter & squeak. This was common with the 1974-76 Honda pads, and went away when we could get sintered (with brass bits) pads again around 1984 or so. The new calipers in the 1976-78 bikes used different (smaller) pads that were made of the same stuff as the K0-K4 pads, no squeal but an occasional squeak. These were all asbestos pads, though. I have never found that extra looseness (vertical wiggle/travel) of the caliper's arm made any difference, except once when it was so worn on a high-mileage K1 that it made a loud "clunk" each time the brake was applied after replacing the worn-out pads (80k miles). On that one I just replaced the O-rings on the pivot pin with thicker ones, which cushioned the arm's upward travel at each application: Honda recommended just replacing the hanger and arm. We didn't have one at the time.
3. In the 1990s, EBC came out with the "ecologically friendly" pads. These came in 2 types: ones that squeaked 100% of the time and those that don't squeak: they also don't stop very well, and in the wet, not at ALL. Avoid those if possible.
4. The clearance between the stationary pad and the disc should be 0.003"-0.006", as set with the adjuster screw and feeler gage between the pad and disc. If there is any air in the brake line, this clearance will also cause the brake to not engage until the lever is pulled nearly to the grip, so it is a good way to "test the bleed job" for completeness. I bleed by pulling the lever in until both of the little holes in the fluid reservoir show no piston in view, then wire it right there, open the caliper's bleed valve with the handlebars turned fully left, and leave it there for at least 1-2 hours (or overnight if not flowing). Then I'll wiggle the lever a couple of times (in that same handlebar position) to see if any bubbles appear, repeat until clear. Even one tiny bubble in the line will make the fluid expand and press the caliper gently against the brake, making it glaze, drag and squeak when warmed up.
5. [This is for rebuilt master cylinders] Make sure the new master cylinder piston is the same type as came out of the brake. There are 4 different types, and 3 different lengths, varying by about 2mm longest to shortest. The first type is found in the K0-K3 and early K4 built before [about] 1/1974, the second type is found in the later K4 thru the K6 and the earliest F0 bikes. Then it changed to the type found in the K7/8. The ones in the F2/3 are also different from the K bikes. What can cause trouble here is: using the later K4-K6/F0 type in the early bikes' master cylinder or vice versa: using the later ones in the early master cylinder will cause it to have no brake until you pull the lever a few times - and this happens every morning. The opposite is: the brake will not prime, period. The spring-relief valve is different in the 2 K master cylinder's valves, which causes the problem. "Generic" rebuild kits don't, in my experience, release the brake caliper very well - which sorta sounds like yours? It should release the caliper almost instantaneously with the brake lever release, if correct.
This last one has caused some "cafe" builders to use some other bike's master cylinder when their careless non-attention to these details caused them troubles and they didn't want to be bothered to fix it properly.
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